Before the onset of COVID-19, retailers trying to bring consumers back to the physical store were honing their merchandise selections and reimagining their in-store experience. However, these initiatives abruptly lost their relevance amid the reality of a sudden lockdown triggered by the spread of COVID-19.
In fact, the onset of a pandemic and subsequent stock-up buying behaviors strained supply chains so greatly and out-of-stocks became so rampant that the biggest attraction retailers could offer their customers was simply having merchandise on the shelves.
Even before the pandemic, out-of-stocks were a staggering $1 trillion problem, and nearly three-quarters (71%) of retailers named “lack of real-time inventory visibility” as a top obstacle to overcome. Despite the inventory management changes that have occurred in 2020, retailers have not reduced expectations for minimizing out-of-stocks and are still willing to cut ties with suppliers unable to fulfill evolving demands.
When preferred brands or products weren’t available during the initial lockdown, whether physically or virtually, shoppers quickly dropped their brand loyalty, and were willing to try new private label brands, or any brand that was in stock, in bigger quantities than usual, setting off additional supply chain constraints.
Fast forward to the present, expanded fulfillment options and acquisition of goods add another layer of complexity to the convoluted mix. As of October 2020, our data shows that e-commerce sales have grown 63% year-over-year across all retail sectors, and buy-online-pickup-in-store (BOPIS) sales have grown 75% from October 2019-2020.
As Thanksgiving approached, our October e-commerce data reinforced the notion of consumers continuing the trend of stockpiling behavior, noting sales of cranberry sauce shot up 397%; melting cheese increased 162%; and stuffing is up 274%.
With the added growth for delivery partners like Instacart, retailers are not only accountable for fulfilling ever-changing in-store and online shopper demands, but they must also differentiate and fulfill order picker demands, simultaneously. According to our data, grocery delivery spending peaked on April 20 at 527% year-over-year growth, and has maintained steady year-over-year growth at 194% as of Nov. 17, 2020. Instacart’s trajectory is having a long-term impact on the grocery supply chain having entrenched itself in the #1 spot for 1H 2020, causing a real shift in buying patterns.
People who used Instacart before the pandemic are now spending more money with Instacart than they did prior to the pandemic. But people who never bought online before, who prefer to shop in-store, made the decision due to COVID-19 to start buying online, and are sticking to it.
Often the best way to have early visibility into these changes in consumers’ behavior is to carefully monitor the early-warning indicators that only alternative data sources can provide, such as weather, geo-location, and transaction (credit and debit card and e-receipt) data. Taking a close look at our own geographic-based transaction data, we saw that pre-COVID-19, New York grocery stores, as an example, had 41% market share and Instacart had 11% market share. During COVID-19, that 41% went down to 30% and Instacart’s jumped to 27%.
In retrospect, given the rapidly shifting trends, the volatility between having and being stocked out of merchandise makes sense, and it was a challenge to any retailer trying to forecast what might be needed, where and when. Where stores have traditionally gotten by re-stocking shelves only once or twice a day, this has now drastically changed in order to fulfill growing demand occurring at new times throughout the day.
When demand suddenly increases in various departments concurrently, how does a retailer know where to prioritize resources? How can they anticipate where demand will continue to grow, stabilize, or shift as external factors continue to evolve and influence change?
This brings us full circle to the imperative of data-driven category management. Throughout the pandemic, we have seen access to comprehensive and collaborative data and analytics tools become the dividing force between successful retailers and brands, and those that experience difficulties.
A single source of truth is essential for cross-organization collaboration, providing near real-time insights to products, categories, transactions, loyalty, item movement, and inventory levels to all stakeholders, simultaneously. But enabling internal collaboration is not enough. Sharing data with external partners is one of the only reliable ways to recognize, react, and respond quickly enough to address volatile consumer demands across the omnichannel.
Enhanced supplier collaboration expands the ability to dig deeper into the known and unknown challenges ahead, facilitating the delivery of more targeted, localized assortment planning at the household level — addressing competitive advantages in time to meet the ever-changing demands of today’s consumer.
Pandemic challenges aside, retailers have become very adept at executing promotions and loyalty campaigns. However, if they don’t have the goods on their shelves and availability online, how can they fully measure and determine successful outcomes while planning for the future?
The current environment of uncertainty and change is merely highlighting existing deficiencies and opportunities to address evolving demands. Integrating inventory data alongside sales and loyalty allows you to acknowledge and address stock-outs as they occur and optimize your assortment and promotional strategies in real-time.
Retailers without this foundational, data-driven category management strategy in place will be challenged to respond to customers quickly and efficiently enough to survive in the long run.
Inna Kuznetsova is CEO of 1010data, a provider of analytical intelligence and alternative data, enabling financial, retail and consumer goods companies to monitor shifts in consumer demand and market conditions and rapidly respond with highly-targeted strategies.